If you try to find out how expensive it is to raise a child, you see lots of different figures. The Wall Street Journal thinks it costs $47k a year. The FDA calculator thinks it’s more like $13k a year. Early-retirement gurus like Mr. Money Moustache think it costs virtually nothing. How is that last category coming up with their numbers?
I can see two sides to this – if you have at least one stay-at-home parent, live in a cheap area, and generally reduce expenses, yes, I agree, raising children doesn’t have to be expensive. People all over the world do it for a lot less than Americans spend.
Even American spending varies wildly by income level. Higher-income families spend over twice as much as lower-income families.
Let’s say we wanted to be a one-income household with a young child. How would we manage?
– One stay-at-home parent means virtually no childcare costs.
– Health care (insurance, copays) for all three of us might be $3k.
– A two-bedroom apartment in Cambridge, MA with utilities might be $21.5k a year.
– Spending money (clothes, vacations, cell phones, entertainment): $5k a year.
– Groceries: $200/month; $2.4k a year.
– Taxes: $1k a year
– Saving: $4k a year
– Transit (public transit pass, bike repair, etc): $900/year
That would put our expenses around $38,000 a year. I used to earn $33,000 as an administrative assistant, so this would be doable if you could earn a little more. If we earned less than this, we’d probably move to somewhere cheaper than Cambridge.
Of course, this isn’t what we actually do.
For one thing, we don’t reduce expenses as much as we could. The Boston area is expensive, but we like it. We like living near Jeff’s family. We like the public transit system. We like the thriving folk dance community. We like being near great universities and the people they attract. And while we could live more cheaply in another city or a rural area, we think the benefits of this environment and community outweigh the costs.
Also, we use money for more than just establishing our own quality of life. We value our family a lot and we prioritize ourselves financially, but not to the expense of all else. Specifically, we donate a good chunk of our income (50% this year) to the best charities we can find. That’s possible because we have two incomes.
I can see the appeal of retiring early, working part-time, or having a stay-at-home parent. But I also value other people’s children, and this year we expect to save about 20 people’s lives from malaria. To me, that’s totally worth it.
As for the question of how much it will cost to raise our child: Jeff and I write down everything we spend, so I’ll let you know after the first year.
Update: what we spent in the first year.
Wow, I didn’t realize spending on kids varied that widely. What do you plan to do about education? Anecdotally, my expensive private high school education seems like it was probably justified on utilitarian grounds.
Also, is it usual to pay 1k in taxes on 38k in income? That seems remarkably low, like, you need a taxable income of <10k or something.
Ben, could you elaborate on why your private high school education was worth it? What school did you go to / how much did it cost / how did your experience differ from the most likely public school alternative. I’m particularly interested in the benefits of private high schools vs. public magnet schools vs. magnet programs within normal public schools.
Well, the most obvious way it was worth it was that I probably wouldn’t have gotten involved with rationality or effective altruism had I gone to a public school. I also think that I’m substantially better at writing, critical thinking, and having a work ethic than I would have been had I gone to a public school, but I’m much less confident of this.
I went to Commonwealth School (http://www.commschool.org/). I don’t remember how much my family paid–they have fairly good financial aid for a private high school–but the sticker price is almost 37k now. It was beneficial in the following ways relative to my local public school, from greatest to least effect:
– A strong culture of service/community-orientation/general doing-the-right-thing, and a tendency to foster ethical ideals, plus bringing in Peter Singer to speak, all of which contributed to my getting involved in effective altruism.
– Assigning a lot of genuinely challenging work, which forced me to develop a work ethic and probably accelerated my education by at least two years relative to public school. This in turn means I’m able to do more awesome things in college.
– A very strong curriculum in the humanities and excellent teachers; I’ve been comparatively disappointed with my (admittedly limited) sample of humanities courses at Harvard. Having previously self-identified as a “math person” this was an important growth experience.
– A stronger curriculum in math and physics; I finished proof-based calculus in 11th grade and also got to take linear and abstract algebra.
– Many more electives. Overall, I’d say Commonwealth saved me at least a year’s worth of college courses purely by passing out of them.
That being said, I think magnet schools would have a number of the same advantages, especially if the high schooler is sufficiently proactive about taking good/accelerated courses, or can take college courses where available. I can’t speak to this as much since there were no available magnet schools that I could have gone to.
I was lucky to go to a public magnet high school that I think was very similar to Commonwealth. It gave me the benefits of having good academics and smart, geeky classmates without the cost. I don’t think anything like that really exists in Cambridge or Somerville, so I’m not counting on it happening for our kids. I think we may end up paying for private middle school or something. I think the Cambridge public high school has pretty varied outcomes – it’s quite diverse, so the average kid doesn’t do so well, but the kids from high socio-economic backgrounds get a lot of services, good classes, and good outcomes. So we’d probably try for that, depending on who our kids turn out to be and what they seem to need.
Thank you Ben! That was a very helpful breakdown.
> is it usual to pay 1k in taxes on 38k in income? That seems remarkably low,
> like, you need a taxable income of <10k or something.
If your income is $38k you should get the $12.2k standard deduction and $11.7k of dependent
deductions, so your federal taxable income would be $14.1k. The tax is then $1,413, but you get the $1000 child tax credit which brings your income tax down to $413/year. Add some more for social security etc and you're up to something like $1k total.
Oh, neat. I didn’t realize there were so many deductions.
I was surprised how low it came out too. Which might mean I made a mistake? Someone else want to look at the 1040 and see if it does work out this way for a married couple with one kid making $38k?
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